Well it’s the time of year for new predictions. The ’experts’ all giving their predictions for 2018 and beyond. You will hear the market will crash…you will hear the S&P 500 will pull back to below 2300 (currently 2750 about a 15 to 20 % decline)…you will hear the bull market will continue indefinitely…you will hear all your money should go into ‘bitcoins’. And on and on…
These predictions like all the others are good for absolutely nothing. Except perhaps for the predictor to sell you their ‘timely’ newsletter(s) to unsuspecting gamblers. These Wall Street bullies do not trade on their own predictions. These bullies make money solely on selling worthless newsletters.
Investors are constantly looking for predictions because they want stock market returns with Treasury bill risk. What they get is Treasury bill return with stock market risk. We are all looking to avoid pain and seek pleasure.
Personally, I work out regularly. It keeps me in shape and focused. There is one saying that sticks with me, ‘No pain….no gain’. Well for investors that allow their emotions to guide their investment decisions and avoid risk during down turns I have a similar saying…
‘Short term gain ….long term pain’.
If you allow the Wall Street bullies to guide your investment decisions you may experience the short-term gains like the avoidance of a downturn or the exhilaration of a hot stock (like bitcoin) or asset class. In the long term you will suffer because your portfolio lacked diversification AND discipline.
Like everything in life someone will get lucky and make a correct prediction.
Of course, past performance is no indication of future results.
Unfortunately, we as investors have no idea whose prediction will be right. The efficient market hypothesis says all the knowable information about a particular investment is already in the price right now.
This is due to the fact that the markets are random and unpredictable.
An added note Dr. Eugene Fama of the University of Chicago wrote the efficient market hypothesis in 1965 and won the Nobel Prize in Economics in 2013. It has stood the test of time.
Many of you may be saying…’Tony you say the same thing week after week and year after year’. Well you would be right, because no matter how many times the same pattern repeats investors make the same mistakes over and over. So my message will be repeated over and over. This is what coaches do.
Coaches work with you to develop a ‘game’ plan or in technical terms the Investment Policy Statement. As with all plans it is a meaningless exercise if you develop your plan and never implement it. Or follow the plan for a while and then when things change for the worse abandon the plans.
This is where your investor coach really exhibits their value to you and your financial future.
Remember the Doc Rivers quote: Average players want to be left alone…good players want to be coached…great players want the truth.
With a solid game plan in place your coach will keep you focused on the long term and remain disciplined.
The opposing team may come up with a ‘trick’ play and score and perhaps win the game. This is due to luck and not skill. However, with a solid game plan and discipline you will win in the long term.
Stop looking for predictions. Do find an investor coach to guide you to a successful plan.